DCF Studio

    DPZ · NMS · Consumer Cyclical

    Domino's Pizza, Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 244.05

    Market price

    USD 294.20

    Implied upside

    -17.0%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    AdjustedCapital expenditure runs at 2.3% of revenue against depreciation of 1.8%. A perpetuity has to be a steady state, so the terminal year uses maintenance capex at depreciation and then charges the reinvestment terminal growth requires (g/ROIC of NOPAT). The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 244.05-17.0%
    Exit multiple
    USD 280.05-4.8%
    Market price
    USD 294.20

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0m414m829mFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 5.1bnUSD 5.2bnUSD 5.4bnUSD 5.5bnUSD 5.7bn+2.9%
    EBITUSD 923.2mUSD 949.8mUSD 977.1mUSD 1.0bnUSD 1.0bn+2.9%
    NOPATUSD 731.8mUSD 752.8mUSD 774.5mUSD 796.7mUSD 819.6m+2.9%
    Add depreciation & amortisationUSD 91.9mUSD 94.5mUSD 97.2mUSD 100.0mUSD 102.9m+2.9%
    Less capital expenditureUSD -115.8mUSD -119.1mUSD -122.6mUSD -126.1mUSD -129.7m+2.9%
    Less increase in working capitalUSD 32.1mUSD 33.0mUSD 34.0mUSD 34.9mUSD 35.9m-2.9%
    Free cashflow to firmUSD 739.9mUSD 761.2mUSD 783.1mUSD 805.6mUSD 828.8m+2.9%
    Discount factor0.96170.88930.82240.76050.7033-
    Present valueUSD 711.5mUSD 676.9mUSD 644.0mUSD 612.7mUSD 582.9m-4.9%
    Present Value Of The ForecastUSD 3.2bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta0.964Reported 0.946, pulled toward 1.0 (Blume)
    Cost of equity10.30%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 9.7bn65.8% of capital
    Total debtUSD 5.0bn34.2% of capital, book value as a proxy
    Tax rate20.7%Effective, capped at statutory
    WACC8.13%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 244.05

    76% of EV

    Forecast FCFF, final year
    USD 828.8m
    Capex at depreciation, working capital in reinvestment
    USD 819.6m
    Less reinvestment at g/ROIC (4.2% of NOPAT)
    USD -34.2m
    Capitalised
    USD 785.5m
    ROIC (reported)
    60.0%
    Terminal value, undiscounted
    USD 14.3bn
    Terminal value, discounted
    USD 10.1bn
    Enterprise value
    USD 13.3bn
    Less net debt
    USD 4.9bn
    Equity value
    USD 8.4bn

    Exit at 14.1x EBITDA

    Value per shareUSD 280.05

    78% of EV

    Terminal value, undiscounted
    USD 16.0bn
    Terminal value, discounted
    USD 11.3bn
    Enterprise value
    USD 14.5bn
    Less net debt
    USD 4.9bn
    Equity value
    USD 9.6bn

    Spread between methods: 14%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    6.13%345.92391.61449.83526.57632.38
    7.13%261.00289.79324.76368.16423.45
    8.13%201.67221.14244.05271.39304.61
    9.13%157.86171.71187.64206.13227.89
    10.13%124.19134.42145.97159.13174.25

    Outlined: this model. Green text: above today's price of 294.20. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year2.9%5.5%+2.6pp
    EBIT margin18.2%20.5%+2.4pp
    Discount rate8.1%7.5%-0.7pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.